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USDA GAIN: Poultry and Products


08 January 2013

USDA GAIN: Brazil Poultry and Products Semi-annual - February 2013USDA GAIN: Brazil Poultry and Products Semi-annual - February 2013

Post forecasts broiler production to increase by less than 2 percent in 2013 to 12.8 million metric tons after a small decline in production in 2012. Post forecast reflects a conservative estimate by our trade sources that, although the Brazilian economy is expected to recover in 2013, demand for animal protein will increase slowly due to high consumer debt and higher prices of chicken meat compared to beef. The export market will also likely improve in 2013, but at a moderate rate of growth.

USDA GAIN: Poultry and Products

Executive Summary:

Post revised broiler production to increase at a smaller rate in 2013 after a decline in 2012. Post’s forecast reflects a general opinion among trade sources that Brazil’s economic growth is expected to recover from the poor result of 2012 and that estimated record Brazilian soybean and corn crops should help to mitigate the impact of rising feed costs. However, Post sources also identify other concerns that can adversely affect the poultry sector this year: a) squeezed profit margins for producers and processors due to rising feed costs may continue through the first half of this year; b) the high level of consumer debt in Brazil may also undercut domestic demand of animal proteins in general, c) poultry will compete with lower priced beef, and, d) broiler exports are also forecast to increase slowly because of the continued uncertainties in the world economy. Post also revised the outlook for turkey production and exports in 2013 with projected increases in both categories.

Commodities:

Poultry, Meat, Broiler

Production:

Broiler production is forecast to grow by 1.5 percent in 2013, as compared to Post’s revised downward production level in 2012. FAS Brasilia believes that a production estimate at 12.8 million metric tons reflects the current expectations of trade sources with improved economic conditions next year after a poor increase of one percent in the 2012 GDP and estimated record soybean and corn crops which should moderate the price increase of these two major inputs. In addition, the federal government will make use of several domestic support programs and will extend credit payment deadlines to assist broiler producers in reducing the impact of rising feed costs.

However, there are some concerns that can impact next year’s forecasts: a) the current high grain and oilseed prices have squeezed producers’ profit margins last year, mostly in the second half of the year. This situation may continue throughout the first quarter of this year; b) a slowdown in the growth path of domestic consumption due to the high level of indebtedness of Brazilian consumers and greater competition from lower beef prices; and c) current disappointing export performance due to the international economic uncertainties derived mostly from the European Union’s financial crisis and some trade issues, mostly with the Russian Federation and South Africa, could undercut the forecast.

Post revised 2012 broiler production to 12.6 million metric tons, a drop of nearly two percent from 2011 reflecting the problems faced by Brazilian producers with very high feed costs and their decision to cut production by 5 to 10 percent last year.

Production Costs

The increase in the cost of broiler production in 2012 is estimated at a record of nearly 40 percent, while the producer price during the same period increased by 46 percent. These reference prices are for Parana state, the largest broiler producer in Brazil with a market share of nearly 28 percent of total broiler slaughter. The increase in the cost of production is basically due to higher feed costs, mostly corn and soybean meal.

Consumption:

Domestic consumption of broiler meat in 2013 is projected to increase by only one percent reflecting a continuing increase in the price of broiler (RTC), high indebtedness of Brazilian consumers, and competition from lowered beef prices.

Trade:

Post forecasts broiler exports in 2013 to increase by nearly 3 percent. The growth in exports is likely to be driven by higher sales of whole broilers, in general, and chicken parts to China and Hong Kong in particular. Trade sources also expect higher exports to Egypt and Iraq. Brazilian exporters currently have three major concerns affecting the outlook for broiler exports in 2013: a) despite the recent devaluation of the Brazilian currency, higher production costs of broilers during the second half of 2012 and first half of 2013 are expected to impact on the cost of exports; b) uncertainties derived from the world financial crisis, mostly in Europe, and its impact on importing markets will slow growth; and c) specific trade issues with major trading partners such as the Russian Federation (slow relisting of Brazilian poultry plants), Venezuela (payment defaults) and South Africa (application of antidumping tariffs on Brazilian broiler of 62.92% on whole broilers and 46.59% on chicken parts) will continue to negatively affect performance.

Post updated trade data for Jan-Dec 2012 to include final official export numbers. The total volume of Brazilian broiler export in 2012 (not including the paws methodology) reached 3.7 million metric tons, valued at US$7.2 billion.

Brazil exported broilers to 152 markets in 2012, of which nearly half went to five markets (Saudi Arabia [17%], Japan [10%], Hong Kong [8%], United Arab Emirates [7%] and China [6%]). Markets with major increases in 2012 were South Korea (+265%), followed by Kazakhstan, Ukraine, Libya, South Korea, Lebanon and Egypt. Markets with major declines were Venezuela, the European Union, Iran, South Africa, Iraq, Hong Kong and Japan.

Note: The S&D table excludes chicken feet and paws exports to China and Hong Kong, as per USDA pawns methodology.

Commodities:

Poultry, Meat, Turkey

Production:

Turkey production is project to increase by nearly 4 percent in 2012, mostly driven by a continued growth in exports. Rising feed costs combined with a slowdown in the path of growth of domestic demand are the main factors currently affecting production growth.

Trade:

Exports

Turkey exports are project to continue to grow in 2013, but at a reduced path of growth as the European Union is likely to moderate imports from Brazil. In 2012, Brazil exported a record of 170,000 metric tons of turkey, of which the European Union accounted for nearly half of all exports, followed by South Africa (12%) and Benin (11%).

February 2013

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